Greif(US:GEF)2023-03-02 18:34Financial Data and Key Metrics Changes - In Q1 2023, net sales decreased by $293.3 million, primarily due to volume declines and the impact of $89.4 million from the divested FPS business [93] - Adjusted EBITDA was reported at $164.5 million, reflecting a decline compared to the previous year [93] - Gross profit declined by $38.1 million, attributed to lower volumes and steel price cost headwinds [93] Business Line Data and Key Metrics Changes - The global industrial packaging (GIP) business faced low double-digit volume declines year-over-year, with North America being the weakest market [14][16] - Paper packaging sales declined by approximately $50 million due to lower mill and converting volumes, despite year-on-year pricing tailwinds [39] - The company took approximately 94,000 tons of economic downtime across its mill system, impacting production [39] Market Data and Key Metrics Changes - The North American market showed no improvement, while LATAM remained strong, and EMEA and APAC experienced weak volumes with some sequential improvements noted in February [8][14] - The company expects further deterioration in pricing in the paper industry if current demand trends continue [5] Company Strategy and Development Direction - The company is focused on its "Build to Last" strategy, emphasizing long-term growth and disciplined execution [90] - Recent acquisitions, such as Lee Container and increasing ownership in Centurion Container, are part of the growth strategy, aiming for margin accretive and sustainable business models [13][85] - The company is committed to managing costs aggressively while remaining agile to support customer demand when it improves [3] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding the macroeconomic environment, stating that demand trends have not shown expected improvements [5] - There is hope for a demand recovery in the second half of 2023, contingent on current volume pressures subsiding [16] - The company remains confident in its balance sheet strength and cash flow generation to support growth initiatives [41] Other Important Information - The company has set a low-end guidance for 2023 EBITDA at $740 million, reflecting significant caution due to current demand trends [5][16] - The company is actively managing working capital and has aggressive goals in place to improve cash flow [16][40] Q&A Session Summary Question: What is the current status of destocking? - Management indicated that while there has been an impact from destocking, it is unclear if the process is complete, with no significant changes observed in February [44] Question: Can you elaborate on cost-cutting opportunities in the PPS business? - Management confirmed ongoing efforts in footprint consolidation and shift structure adjustments to maximize production efficiency [21][22] Question: What is the expected impact of the Centurion acquisition? - The acquisition is anticipated to enhance EBITDA by $20 million to $40 million, with synergies expected from increased ownership and supply chain integration [34][77] Question: How does the company plan to manage pricing pressures in the paper business? - Management acknowledged the potential for price erosion if current volume trends persist, with a $33 million pricing impact factored into guidance [50] Question: What are the expectations for the second half of 2023? - Management expressed optimism for a recovery in demand, particularly as comparisons to prior year performance become easier [27][30]